Strategy and Organization

Design
Chapter 3

Dr. Rasim Serdar Kurdoğlu

MAN 361 Organization Theory
Bilkent University Faculty of Business Administration
 What is strategy?
• It is a plan for interacting with the
competitive environment. Managers
must select specific strategy and design
options in order to achieve official and
operative goals within its competitive
environment.
 Business Strategy
 Business strategy aims at competitive advantage: Increased
market share, increased profitability
 It aims at business goals and mission of the company
 Three competitive strategies
(1) Low cost leadership: this strategy tries to increase market
share by emphasizing low cost compared to competitors (e.g.
Ryanair).
(2) Differentiation: organizations attempt to distinguish their
products or services from others in the industry (e.g. Rolex
watches).
(3) Focus: focused low cost and focused differentiation. The
organization concentrates on a specific regional market or
buyer group (e.g. Puma).
Consider:
• Apple vs Garmin Watches.
• THY vs Pegagus Airlines
• Migros vs A101
• Nike vs Kinetix
 Miles and Snow’s strategy typology: How to
exploit external environment
• The prospector: Innovate, take risks, seek out new
opportunities and grow (e.g., Getir, Arçelik)
• Learning, risk-taking, innovation
• The defender: Stability or even retrenchment. (e.g.,
Vestel)
• Efficiency and tight cost-control
• The analyzer: Maintain a stable business while
innovating on the periphery. (e.g., Sony and IBM)
• Balances efficiency with learning
• The reactor: Responding to environmental threats and
opportunities in an ad hoc fashion (e.g., McDonalds)
• Reacting to current needs
How to give and assess strategic direction?
• Check the external
(rivalry) and
internal
environment
• Check resources
• Check core
competencies
• Check what you
want to achieve
Purpose

Mission: It describes the organization’s

vision, its shared values and beliefs and its
reason for being.
 It sometimes called the official goals,
 A mission statement communicates to
internal and external stakeholders.
Official and operative goals
The Importance of Goals
 Official goals and mission statements describe a value system for the
organization. They legitimize the organization

 Operative goals (short-run performance goals) related to key tasks of the

organization. They are more explicit and comparatively well defined. Operative
goals serve several purposes:
• Employee direction and motivation
• Decision guidelines
• Standards of performance
Organization design
 Organization design is used to implement goals and
strategy and thereby influences the prospects of
success.

 Organization design is not always a highly rational

process which involves careful calculation and
proceeds smoothly through a serious of stages. In
fact, the design of organization is political process in
which established routines and vested interests are
challenged and defended.
 Example: Facebook and Meta
Assessing organizational effectiveness
• Effectiveness: Whether the organization realizes its goals
• Efficiency: Ratio of inputs to outputs
• Balanced Scorecard: Balances traditional financial measures with
critical operational measures
• A balanced scorecard contains four major focal areas:
• financial performance,
• customer service,
• internal business processes,
• the organization’s capacity for learning and growth
• https://www.youtube.com/watch?v=zf-d-O7hVhM&t=191s
The story of Paket taxi and Steve Jobs’ advice
• https://www.youtube.com/watch?v=XQvVq8tZ4Wc&t=547s
• What does it tell to us about strategy, life-cycle, and organization
theory in general?
• What is different in Steve Jobs’ explanations?
• https://www.youtube.com/watch?v=xcTtQ0hiHbE&list=WL&index=8
Team discussion: Mezzaluna vs. McDonalds
• Discussion questions:

1. In terms of Porter’s strategies, how would you define these 2 companies’ strategies (low cost-
differentiation)? Why?

2. How are they different? Their customers and target segments? Their goals? Their values? Their quality of
products and services? Their operations? Preparation of meals? Prices?